Goldfinger compiled a great article on lessons learned during 2017 from some of the more prevalent posters on CEO.
At first it was hard to come up with definite lessons since I personally feel my investing strategy has changed so drastically in just one year that it was difficult to select any given one. After a while I fortunately came up with a few and in this article I would like to expand on those as well as add a few other. I constantly try to synthesize and hammer out important (often intuitive) thoughts I have regarding investing in this space, but I’m a bit sloppy when it comes to writing them down…
“In 2017 I learned how important people are in this tough business. I think a lot of investors are underestimating how much expected value changes depending on who is running a company. Buy the best with a proven track record.”
This is in my opinion probably the greatest lesson I have learned for real this past year. We all know this is a really tough business where most companies will be gone in a few years (along with your investment). Multiple aspects MUST be in place and taken care of for a company to succeed (which of course varies depending on the stage of the company) in terms of; Geology, capital preservation, funding needs, focus on the right things in the right order, social aspects, political aspects, growth prospects, good geologists, capital structure and infrastructure etc.
GOOD management teams and a GOOD board of directors with a history of successfully having navigated through all these hurdles and ultimately having been able to give a nice return to shareholders are literally worth their weight in gold. Usually they will have ticked a lot of boxes before a single drill hole has been done for example. They will have de-risked any potential investments materially since they know what a good project (with some of the boxes ticked off already) looks like to begin with.
If you would compare the top people/management teams and the amount of success these have had and compare it to the industry standard, then I think it would be really obvious that there is some huge intra-sector alpha to be had by investing alongside these guys and girls. Good examples of this would be the Lundins, Ross Beaty and Robert Friedland.
A good management team/board of directors coupled with high insider ownership and/or recent insider buying is probably the best and cheapest positive due diligence any investor can get.
More articles covering additional investing lessons I have learned will be posted over the coming days.
The Hedgeless Horseman
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